Andover.net: Another One for the Linux Bandwagon

With the surge in RedHat (RHAT)
, anything Linux has been red hot. For instance, the long-struggling
software developer, Corel (CORL)
, rocketed because of rumors of a possible acquisition from RedHat, as
well as the release of new Linux-based applications.

Linux is an operating system based on the open source concept. That is,
programmers across the world are allowed to add and modify the source code
of the operating system. This is very different from the traditional
approach, in which a company -- such as Microsoft -- has its own developers
who create software.

It was a young developer, Linus Torvalds, who created Linux in 1991. He
posted it on the Net and it has evolved into a robust operating system,
with the support of such companies as IBM, Intel and Hewlett-Packard. In
fact, Linux accounted for about 17 percent of new licensed shipment of server
operating systems in 1998 (according to International Data Corporation).

One of the companies spawned by the Linux revolution has been
Andover.net . Revenues have increased
from $1.3 million for 1998 to $2.1 million for 1999. The company is
primarily advertising driven (95 percent of total sales). There are over 130
advertisers, with the top ones being EarthWeb, IBM, CNET, Broadcast.com and
Silicon Graphics.

Furthermore, about $570,000 of the 1999 revenues were the result of barter
arrangements. Basically, these are non-cash transactions, in which
companies swap banner impressions.

Andover.Net is a network of Web sites catering to the Linux community. The
company has engaged in an aggressive acquisitions strategy. Purchases
include:

Slashdot.org (June 1999): This is a comprehensive site for the Linux
developer community, chock-full of useful content, discussion boards and
other online resources.

Animation Factory (June 1999): This company has a database of over
100,000 downloadable images.

Freshmeat.net (August 1999): This is a Linux software application
repository.

ThinkGeek.com (October 1999): This is an online retailer for Linux
(such as books, gifts and so on).

All in all, Andover.net has been generating significant traffic. Page
views have soared from 6.5 million per month in 1998 to 45 million per
month in 1999. This represents about 50 percent of visits to Linux resource sites
on the Web.

Next week, Andover.net plans to have its IPO. The proposed ticker symbol
is ANDN and the price range is $12-$15.

In most cases, it is difficult for individual investors to get shares in an
IPO. However, Andover.net is different. The company is using OpenIPO.com, which distributes shares of
IPOs based on the Dutch Auction method (the system was developed by Nobel
winner William Vickrey).

Here's how it works: Over a certain period of time, investors can place
bids on the IPO. These bids are under complete secrecy. When all the bids
are submitted, the OpenIPO.com system determines the lowest price that will
allow for the company to raise the necessary amount of funds. Then, all
bidders get this price, if their bids were at the price or higher.

It does not matter if you are a billionaire or a pauper. If your bid wins,
you get shares. It's as simple as that.

The problem with the system, though, has been that the auction allows for
demand to equal supply. In other words, the system provides for market efficiency. So, in theory, there should be no pop in the IPO shortly after the debut as is so often the case with new offerings in the sector.